Charter schools fall short of district schools in local, federal tax funds

Two years ago, Great Hearts Academies, a Valley chain of suburban charter schools, opened its first inner-city school in a large church east of downtown Phoenix.

But the school, Teleos Preparatory Academy, nearly went bust its first year despite having more than 230 students, mostly Black and low-income, and getting big private donations and a federal startup grant. Teleos, with Grades 1 through 8, overran its budget, and Great Hearts injected $300,000 to keep Teleos open this school year.

Daniel Scoggin, CEO for Phoenix-based Great Hearts, said there isn't enough money to help low-income students, who tend to struggle in school.

"It's dire. We really need more money to make this thing (school) sustainable," Scoggin said.

Teleos' future is shaky, charter industry officials say, partly because it depends on a funding system that unfairly shortchanges charter schools. That funding gap has widened since charter schools were introduced in Arizona in the 1990s, officials say.

Charter schools receive hundreds of dollars less per student in total funding from state, local and federal sources than district schools, but they are held to the same learning standards and must improve student academic achievement.

All of the state's public schools are complaining about a lack of money. Budget cuts have been painful in a state that's already near the bottom nationally in K-12 funding, they say. But those who operate charter public schools say their situation is worse.

That's why in 2009, seven families enlisted by the Arizona Charter Schools Association sued the state, arguing charter schools should get the same level of funding as district schools. The suit is pending. The families said the unequal funding means their schools use inadequate facilities, have insufficient technology and supplies and pay teachers less, making turnover more likely.

Charter schools also want more help for extracurricular activities, sports or lunch rooms. Those aren't required for charter or district schools but are usually expected from districts.

No one disputes that charter schools receive less funding on average. An analysis of state data by The Arizona Republic shows charter schools collected an average $1,623 less per student over the past five school years combined - $7,806 compared with $9,429 for district schools. That's because charters don't get local property-tax revenues and generally get less federal money per student because they teach fewer low-income and special-education children. They receive more state general-fund money.

Some district officials, however, say charters have an advantage because they don't have to hire licensed teachers and can limit the size of their schools, adding that both charter and district schools suffer from lack of funding.

John Huppenthal, state superintendent of public instruction, said he would like to close the funding gap but the state doesn't have the money and charters are attracting more students despite the disparity.

"They are holding their own and bringing on more students in this environment, even though they are at a cost disadvantage," Huppenthal said.

Purpose of charters

Arizona's first charter schools opened in 1995, approved by the Legislature the year before as part of a conservative school-reform movement.The number of charter schools has gradually risen to 510, and they educate about 100,000 students each year, or 10 percent of students in public schools. The average enrollment of a charter school is about 200 students.

By state law, the purpose of charter schools is to improve academic achievement and offer parents alternatives to a district school, private school or home schooling.

Charter schools are owned by companies, mostly non-profits, and some school districts, which contract with the state and receive money based on student enrollment. The hope is that these schools, with fewer regulations, will be more flexible and innovative.

Early on, charters were funded at nearly the same per-student rate as district schools and were considerably less burdened by regulation, said Eileen Sigmund, an attorney who now heads the Arizona Charter Schools Association.

Over the years, increased state and federal regulation added to the cost of operating a charter school, such as requiring charters to hire teachers with degrees in the subjects they taught; state funding for charters didn't keep pace with money that districts got from state funds and local property taxes.

"As charter school champions left the Legislature, the disparity began to increase," Sigmund said.

In 2007, an Arizona Department of Education study showed the gap in state and local funds received by district and charter schools had widened. That information helped spark the 2009 lawsuit.

Like district schools, charter schools are rated by both state and federal governments based on progress on the state's standardized test, Arizona's Instrument to Measure Standards, or AIMS.

Like district schools, charters are required to take any student who wants to enroll, although the best charters fill up quickly and can turn away students when they reach their maximum size. Many offer programs that attract a certain student, such as an accelerated curriculum, ballet and music, online courses or programs for students falling behind.

"They're filling the niche for students who aren't well-served by the districts, whether that's high-achieving or so-called at-risk students," said Jay Kaprosy, a lobbyist for the Arizona Charter Schools Association.

Funding disparities

On average, every student who attends a charter school brings in about 18 percent less money for operations than if the same student attended a district school.

The Republic's analysis of five years of data found some major differences in operating budgets:

- Local revenue. Local funds include property taxes, student fees and money from donations and fundraising events.Local money makes up about 42 percent of district schools' operating revenue each year and 7 percent of charter schools'.

Most local funds for districts are generated from property taxes. Most of that money is controlled by the Legislature, which determines how much each district receives annually. More than half of the state's districts get additional property taxes approved by voters in "override" elections.

Charter schools don't get property-tax revenue. Their local funds include student fees for such items as lunch and transportation, some grants and "activity receipts," or money from contributions and fundraisers.

Charter schools cannot charge tuition, but many are blunt with parents about the need for contributions and promote tax-credit donations. Teleos' website says that state funding leaves the school $1,500 per student short of what it needs to meet academic goals. "Teleos Prep asks its families to support these essentials of excellence through the Community Investment campaign," the website says.

"Let's be clear: It's a donation," Scoggin said. "We're not high pressure. It's a soft sell. It's an emotional sell. And it always comes after they're enrolled. There's no expectation that you have to give to get in."

- State revenue. District schools get about 45 percent of their money from the state general fund; charter schools receive 82 percent. State funds for districts are intended to make up for revenue not generated by regular, or non-override, property taxes. The state provides the money to ensure that schools in districts with lower property values receive about the same basic per-student funding as other districts.

In 1999, the state began giving charter schools extra funding to help compensate for not getting money from property taxes and other state funds, such as extra teacher compensation, supplies, transportation and building repair. State funds for charters average $6,382 per student, or $2,168 more than districts receive in state funding per student. But the extra money doesn't make up for what districts get from local property taxes and federal funds.

- Federal revenue. Over the past five years, district schools got about 13 percent of their money from federal funds and charters got 11.5 percent. But that five-year average was skewed by 2009-10 federal stimulus money that helped charter schools more than district ones on a per-student basis. Minus that year, districts got 11.6 percent and charters 8.5 percent. Charter schools receive less federal money because they serve fewer low-income and disabled students. Only non-profit charter schools are eligible for federal funds.

Creating special learning programs for disabled students is expensive. Charter schools are not legally allowed to turn away disabled students and some specialize in teaching them. But most charter schools are small, limiting the students they can help. Even large districts find it expensive to hire special-education teachers and therapists to serve disabled students.

It's not that charters are turning away special-ed students, Kaprosy said, rather that parents are choosing established district programs that may offer more for children.

"The parents are making the decisions," Kaprosy said.

Facility funds lacking

The greatest disparity in funding of charter and district schools is money for facilities, charter operators say.

Charters say the state money they receive isn't nearly enough to build or lease a campus that is competitive with district schools.

Charter schools often set up shop in strip malls or in buildings on church campuses. One school holds recess in a local park.

District schools can renovate or finance construction by asking voters for permission to sell tax-exempt bonds. The Arizona School Facilities Board also is designed to provide extra funds for building and maintaining buildings in districts.

Charter schools can't tap those resources because their buildings don't belong to the public. If a charter operator owns a building and goes out of business or decides to become a private school, the operator ultimately owns the land and buildings. In most cases, however, they would have to give away the property or its proceeds because the charters are organized as a non-profit organization.

Some of the most robust charters are able to tap the public, tax-exempt bond market.

Since 2000, more than 100 Arizona charter schools have qualified for more than $1 billion in building loans by using bonds issued through authorities set up by Pima County and the city of Phoenix.

It's another reminder that despite their disadvantages, charters have managed to survive and grow.

What parents think

Despite the unequal funding, surveys of parents, interviews and the steady growth of charter schools indicate many parents are not unhappy with charter-school education.

A 2007 state survey of charter parents found that parents like charter schools because the classes are small, teachers are more attentive to their children and the curriculum meets their children's needs and strengths.

Some parents interviewed for this story said they don't care that their schools don't offer athletic programs competitive with districts. Their children participate in club sports instead or aren't interested in athletics.

Some parents were aware that charter schools don't receive as much funding as district schools but said they don't think these shortages harm their children.

Elgin Nelson has three sons at Teleos Prep and said it provides a better education than the district or private schools they've attended in the past.

"My wife and I don't spend a lot of time thinking about how Teleos is going to keep their doors open," Nelson said, adding he has confidence the school's leaders will keep it running.

Scottsdale mother Kay Pace said her daughter is receiving a better education at Teleos Prep from teachers with more passion than she found in private schools.

"I haven't seen shortages here," said Pace, although she's more than willing to contribute to the school. "I faithfully write my $300 (donation) check each month and sometimes I feel guilty it's only $300."

Jeffrey Craven, a Phoenix lawyer who lent his name to the charter-school lawsuit, said charter schools have given him the opportunity to send his two daughters to a small elementary school that uses the Montessori teaching method. In Montessori, students of mixed ages work together and advance academically and socially at their own pace.

But he has seen some differences between charters and districts. Craven said he was surprised that his children's school cannot afford to operate a cafeteria or buses, even to charter a bus for a field trip.

If he could find a small school using the Montessori teaching method in a district, Craven said his two daughters would be in a district school, but he would still support the lawsuit.

"It's that we have this antiquated system that's 30-some years old for how we divide up all the funds that go out to the public schools," Craven said. "And charter schools are treated, to some extent, like the ugly stepsister."